Brownfield Cleanup Program Tax Credit Eligibility and Rates

In the first ten years since it was established, the Brownfield Cleanup Program (BCP) cleaned up more than 190 contaminated sites statewide and incentivized redevelopment. However, it also resulted in the awarding of unnecessary and excessive tax credits. To address this issue, reforms to the program were implemented in 2015 to extend the BCP, and to ensure the program is fair to the state's taxpayers by targeting tax incentives in New York City only to those sites that would not otherwise be attractive to developers.

The reforms address many issues with the current BCP. Specifically, the legislation:

Continues tax credits for 10 years with program reforms. The BCP tax credits were scheduled to expire on December 31, 2015. If they had been allowed to sunset, potential economic development opportunities could have been lost and brownfield sites would have remained fallow or been developed without appropriate environmental cleanup and oversight. In addition, a greater burden would have been placed on the State-funded Superfund cleanup program, instead of being cleaned up by the private sector.

The following provisions apply to sites accepted into the BCP after July 1, 2015:

Sites will have until March 31, 2026 to receive a certificate of completion.

Redevelopment credits in New York City are limited to:

Properties which are located in Environmental Zones (En-Zones), which are areas with high poverty and/or unemployment levels;

"Upside down" properties, where the cost of cleanup is 75 percent or more of the property value as if uncontaminated, or "underutilized" properties, which DEC has defined by regulation; or

Sites that will be redeveloped for affordable housing projects, as defined by DEC in consultation with the Division of Housing and Community Renewal.

Separates BCP eligibility and Redevelopment (Tangible Property) Credit eligibility in New York City. Under the old rules, all projects get redevelopment tax credits for development costs. Credits were not focused on sites in blighted or low-income neighborhoods or on projects that are otherwise in need of tax credits to advance. In addition, windfalls could go to projects that are in strong real estate markets where state assistance for redevelopment is not necessary.

This reform focuses tax credits on blighted areas and sites by limiting eligibility for redevelopment credits in New York City to:

All sites outside of New York City will be eligible for the Tangible Property Credit without being subject to the new tests, provided that:

Contamination in groundwater or soil vapor is not solely emanating from off-site, and

The property has not been previously remediated under the RCRA, Superfund, Brownfield or Environmental Restoration or Spill Response programs for its then-intended use.

The only remediation costs eligible for the Site Preparation Credit are those associated with investigation, remediation or are necessary to obtain a certificate of completion for the site. The costs associated with building demolition and for remediating asbestos, PCBs and lead in structures at the site also qualify for the Site Preparation Credit. The costs of foundations which exceed the equivalent of a site cover system do not qualify for the Site Preparation Credit.

Redevelopment credits are limited to property with a useful life of at least 15 years, and non-portable equipment, machinery, and associated fixtures and appurtenances on the site. Payments for related party service fees (developer fees) can only be claimed when they are actually paid and cannot be claimed under the site preparation or groundwater credits.

BCP Application Requirements for "Underutilized" Determination

Underutilized Property:

If an Applicant requests a determination that a Brownfield Cleanup Program (BCP) site, located in a city with a population of one million or more, is eligible for Tangible Property Tax Credits as an underutilized property, the property must be underutilized as of the date of the application. In addition, documentation must be submitted to demonstrate that the property meets the definition of "Underutilized" set forth in 6 NYCRR 375-3.2(l) at the time of application.

For the Department to make a determination of underutilization, the following criteria apply, and the Applicant should be guided by the information below:

For sites where the anticipated future use is at least 75 percent industrial (The Applicant must include the proposed use in the BCP application):

No more than fifty percent of the permissible floor area of the building or buildings is certified by the applicant to have been used under the applicable base zoning for at least three years prior to the application which zoning has been in effect

Documentation Requirement: The Applicant should provide an affidavit from the current owner of the property that, within the last three years, no more than fifty percent of the permissible floor area of the on-site building(s) was being used. If a new owner, the Applicant must provide an affidavit from the previous owner(s) attesting that, within the last three years, no more than fifty percent of the permissible floor area of the on-site building was being used.

For all other sites, the following criteria and documentation requirements apply:

No more than fifty percent of the permissible floor area of the building or buildings is certified by the applicant to have been used under the applicable base zoning for at least three years prior to the application which zoning has been in effect

Documentation Requirement: The Applicant should provide an affidavit from the current owner of the property that within the last three years no more than fifty percent of the permissible floor area of the on-site building(s) was being used. If a new owner, the Applicant must provide an affidavit from the previous owner(s) attesting that within the last three years no more than fifty percent of the permissible floor area of the on-site building was being used.

The proposed use is at least 75 percent for commercial or commercial and industrial uses

Documentation Requirement: The Applicant should include the proposed use in the BCP application.

The proposed development could not take place without substantial government assistance, as certified by the municipality in which the site is located

Documentation Requirement: At the time of application, the Applicant should supply a certification from the appropriate municipality stating that the proposed development could not take place without substantial government assistance. Certification from the municipality may require an independent financial analysis by a financial expert.

Note: for Region 2 sites, the municipal certification shall come from the New York City Office of Environmental Remediation.

One or more of following conditions exists, as certified by the Applicant:

Property tax payments have been in arrears for at least five years immediately prior to the BCP application

Documentation Requirement: The Applicant should provide property tax records from the municipality in which the site is located.

A building is presently condemned, or presently exhibits documented structural deficiencies, as certified by a professional engineer, which present a public health or safety hazard

Documentation Requirement: The Applicant should provide the municipality's citation or other notice of condemnation with the BCP application. If the building is not condemned, the Applicant should provide a report, certified by a New York State registered and licensed professional engineer, with photographs and thorough analysis, that the structural deficiencies in the building(s) in question present a public health or safety hazard.

There are no structures

Documentation Requirement: The Applicant should provide photographs illustrating the vacant lot with the BCP Application.

Below is a chart showing the various tangible property credit structures:

BCP Tangible Property Tax Credits

Tangible Property Tax Credits

Accepted Prior to June 23, 2008 and Completed by December 31, 2017

Accepted after June 23, 2008 and Completed by December 31, 2019*

Accepted after July 1, 2015 and Completed by March 31, 2026

Baseline (Based on Tax Status)*

10-12%

10-12%

10%

Plus the sum of the following:

Environmental Zone: At least 50% of the site is located in an EN-zone (high poverty and unemployment rates)

8%

8%

5%

Track 1 Cleanup: Unrestricted soil and groundwater cleanup

2%

2%

5%

Brownfield Opportunity Areas: Development conforms with the goals and priorities of the designated Brownfield Opportunity Area (BOA) in which the site is located

N/A

2%

5%

Affordable Housing

N/A

N/A

5%

Manufacturing

N/A

N/A

5%

Maximum Percentage

22%

24%

24%

Cap Non-Manufacturing

N/A

$35M or 3X Site Prep

$35M or 3X Site Prep

Cap Manufacturing

N/A

$45M or 6X Site Prep

$45M or 6X Site Prep

*Please see "BCP Generations and Required Completion Dates", below for some exceptions to the required end dates.